The new norm came into effect after Section 46 of the Banking Regulation Act was amended in the winter session of Parliament. However, the new penalty will be only charged if a norm is found to have been violated after the amendment was notified. It will not be applicable retrospectively. In the past, there were instances of RBI slapping a penalty of Rs 55 lakh, which means the bank was found violating the norms 11 times.
Fines have been imposed for contravening various norms such as know-your-customer (KYC), anti money-laundering and on foreign exchange derivatives, among others. Before imposing the fine, RBI has to serve a showcause notice to banks. A fine is imposed if the regulator is not satisfied with the reply to the showcause notice.
Last week, the Indian operations wing of US-based lender JPMorgan was fined Rs 5 lakh for violating norms related to risk management and inter-bank dealings in 2012.
JPMorgan is primarily involved in investment banking and corporate finance activity in India, through its only branch in Mumbai. It had applied to open one more branch in the country.
Last October, RBI slapped a penalty of Rs 30 lakh on ICICI Bank and Rs 55 lakh on ING Vysya Bank for violating certain norms related to KYC and anti-money-laundering, among others. In April 2011, RBI had imposed penalties on 19 commercial banks for contravention of various instructions issued by RBI in respect of derivatives, such as failure to carry out due diligence in regard to suitability of products and selling derivatives products to users not having risk management policies.
While a fine of Rs 15 lakh each was slapped on Axis Bank, Barclays, HDFC Bank, ICICI Bank, Kotak Mahindra and YES Bank, Rs 10 lakh each was imposed on Citibank, BNP Paribas, SBI, Credit Agricole-CIB, Development Credit Bank, ING Vysya Bank, Royal Bank of Scotland and Standard Chartered Bank.
Besides, a fine of Rs 5 lakh each was slapped on Bank of America, DBS Bank, Deutsche Bank, HSBC and JPMorgan Chase Bank.